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Unicorns, Cheshire cats, and the new dilemmas of entrepreneurial finance

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  • Martin Kenney
  • John Zysman

Abstract

This essay examines the implications of the evolving environment for the formation and financing of new firms in the United States. After the dot.com crash of 2000, there was a regime change in new firm formation and the number of firms that exited through an initial public stock offering. This change was made possible by the decreased cost, increased speed, and ease of market entry due to availability of open source software, digital platforms, and cloud computing. This facilitated a proliferation of startups seeking to disrupt incumbent firms in a wide variety of business sectors. The contemporaneous growth in the number and size of private funding sources has resulted in a situation within which new firms can afford to run massive losses for long periods in an effort to dislodge incumbents or attempt to triumph over other lavishly funded startups. This has triggered remarkable turmoil in many formerly stable industrial sectors, as the new entrants fueled by capital investments undercut incumbents on price and service. The ultimate result is that new entrants with access to massive amounts of capital can survive losses for a sufficiently long period to displace existing firms and, thereby, transform earlier industrial ecosystems.

Suggested Citation

  • Martin Kenney & John Zysman, 2019. "Unicorns, Cheshire cats, and the new dilemmas of entrepreneurial finance," Venture Capital, Taylor & Francis Journals, vol. 21(1), pages 35-50, January.
    • Handle: RePEc:taf:veecee:v:21:y:2019:i:1:p:35-50
    DOI: 10.1080/13691066.2018.1517430
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    Cited by:

    1. Robert Dobre & Daniel Bulin & Maria-Cristina Iorgulescu & Iulia Monica Oehler-Sincai & Olimpia State, 2020. "Artificial Intelligence Sector: The Next Technology Bubble? A Comparative Analysis with Dotcom Based on Stock Market Data," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 22(76), pages 24-37, June.
    2. Yana S. Matkovskaya & Elena Vechkinzova & Valeriy Biryukov, 2022. "Banking Ecosystems: Identification Latent Innovation Opportunities Increasing Their Long-Term Competitiveness Based on a Model the Technological Increment," JOItmC, MDPI, vol. 8(3), pages 1-33, August.
    3. Burström, Thommie & Lahti, Tom & Parida, Vinit & Wartiovaara, Markus & Wincent, Joakim, 2023. "A definition, review, and extension of global ecosystems theory: Trends, architecture and orchestration of global VCs and mechanisms behind unicorns," Journal of Business Research, Elsevier, vol. 157(C).
    4. Adrian Mallory & Anna Mdee & Dorice Agol & Leonie Hyde‐Smith & Domenic Kiogora & Joy Riungu & Alison Parker, 2022. "The potential for scaling up container‐based sanitation in informal settlements in Kenya," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(7), pages 1347-1361, October.
    5. Carolin Bock & Christian Hackober, 2020. "Unicorns—what drives multibillion-dollar valuations?," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 949-984, November.
    6. Petra Kinga Kézai & Attila Kurucz, 2023. "Crisis Resilience of Startup Companies (The Case of Hungary among the Visegrad Countries with a Focus on the Pandemic)," Sustainability, MDPI, vol. 15(9), pages 1-25, April.
    7. Murray, Gordon, 2020. "Ten Meditations on (Public) Venture Capital – Revisited," MPRA Paper 104389, University Library of Munich, Germany.
    8. Neely, Megan Tobias & Carmichael, Donna, 2021. "Profiting on crisis: how predatory financial investors have worsened inequality in the coronavirus crisis," LSE Research Online Documents on Economics 112697, London School of Economics and Political Science, LSE Library.
    9. Heeks, Richard & Gomez-Morantes, Juan Erasmo & Graham, Mark & Howson, Kelle & Mungai, Paul & Nicholson, Brian & Van Belle, Jean-Paul, 2021. "Digital platforms and institutional voids in developing countries: The case of ride-hailing markets," World Development, Elsevier, vol. 145(C).
    10. Lada Vejmelkova, 2023. "Characteristics Of Informal Venture Capital In The Czech Republic: Quantitative Approach," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 32(1), pages 19-51, june.

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